Tech stock share price falls

Cobbler_tone

Kynthia said:

Cobbler_tone said:

QrizB said:

Cobbler_tone said:

AlanP_2 said:

Tell that to the employees of Digital Equipment Company (DEC) back in the 90s. Second largest IT company in the world behind IBM with over 100k employees many of whom had significant holdings in DEC shares.
Worth peanuts when they went bust and added to the loss of income and the fact that those who had the most in company shares were typically the oldest and the ones who struggled to get new employment during a tech downturn and you had a perfect storm.

That's the exception rather than the norm. ... It is a low risk bet to make tens of thousands of pounds in most established companies after a few years service.

It's generally suggested here on the Pensions board that investing in single company shares rather than some sort of broad-based fund is a dangerous strategy, so I'd challenge your assertion that it's "low risk".

Choosing to make that sort of investment in the same company that employs you is just compounding the risk. All your eggs are in one basket.

If you're treating it as a "bet" rather than an investment, and only staking money that you're happy to kiss goodbye to, that's a different matter. But most of us wouldn't put tens of thousands on a horse in the 1430 at Kempton Park, and most of wouldn't choose to invest that much in a random SME that we just happened to be employed by.

Cobbler_tone said:

Our shares have grown 5%-10% every year for the past 30+

That period includes the dot-com bubble and the GFC. Whatever business you've been invested in, it's exceptional to have made positive returns throughout.

As a 40% tax payer, does the 'risk' lessen somewhat that I am buying £300 worth of shares every month for £90?
I'd certainly back my own company (one of the most successful in the world) than go and play the stock market with my £90.

Buying them makes financial sense. However once you're at the point you're allowed to sell them while retaining the gains from the scheme, you should do so. Then you use the funds to invest according to a strategy and risk profile you would have done regardless of where the money came from.

It's extremely high risk to have so much money invested in a single company, and even more risky when your income is reliant on that company.

You should sell them (at the latest) once you leave to avoid tax and CGT. As for before that, it totally depends on timing. 5 years ago they were £30, now they are £60 (plus dividends) and grow each year give or take. That’s without the £10k lump sum when we recut the company. Like I said, it’s minimal outlay and less than what some spend at Starbucks. I let mine build up and take some occasionally. If they were worth nothing tomorrow I’d be quids in. That in itself removes it immediately from ‘high risk’. In fact any pension pot in the land will be higher risk. 
The lived example is that you will struggle to find many who contribute and you won’t find any that have lost out.
I like being a shareholder, it’s great for employee discretional effort. It’s a lot more stable than investing in AI or Bitcoin.
It’s basic maths. 5 years ago my £90 (£300) bought 10 shares. Today they are worth £600. I could sell them tax free today for £600 or next week for £550-650 maybe. People often ask if they should wait for a couple more pounds on the price, I always advise they will be waiting forever and remind them how much they cost.

If the ‘risk’ is that they could be worth 10p then we’ll all have far bigger worries than some company shares! It would be far bigger news than McDonalds or Starbucks going bust overnight….and it is not tech.

I totally get the point of removing that ‘risk’, hence why I used it to prevent borrowing, interest or just have fun. I don’t know anyone who uses it as a core investment strategy and people see it ‘free money.’…apart from the top dogs with share options and million pound dealings.

As for having it where you are employed. They can happily pay me off. 

AlanP_2

It's clear that you are happy with your company and owning its shares but the fact that you bought them cheap and even if they fell in value it wouldn't affect you doesn't reduce RISK.

It can, and sounds like it does, mean that you are more than happy to accept the risk but you have not in any meaningful way reduced it by metaphorically keeping your fingers crossed.  

Cobbler_tone

AlanP_2 said:

the fact that you bought them cheap and even if they fell in value it wouldn't affect you doesn't reduce RISK.

If you genuinely believe that statement then you can't really debate with that.

Hoenir

Cobbler_tone said:

QrizB said:

Cobbler_tone said:

As a 40% tax payer, does the 'risk' lessen somewhat that I am buying £300 worth of shares every month for £90?

The risk isn't in the buying, it's in the keeping beyond the minimum period.

Cobbler_tone said:

I'd certainly back my own company (one of the most successful in the world)

People said that about Enron, and WorldCom, and DEC.

You keep pointing out the exceptions rather than the norm.

That's because every exception is a tale of woe for a group of people.  The concern now is that many people are complacent after the longest bull market in history when it comes to equities. Companies are not ATM's that endlessly hand out what appears to be free money. 

AlanP_2

Cobbler_tone said:

AlanP_2 said:

the fact that you bought them cheap and even if they fell in value it wouldn't affect you doesn't reduce RISK.

If you genuinely believe that statement then you can't really debate with that.

Haha, I guess we'd better leave it there then as that comment leaves me baffled.

BTW - I was an IT Project & Programme Manager for 30+ years, and I also worked with central government on developing the National Risk Register as it related to our geographic area so I have a pretty good understanding of Risk = Consequence / Impact  * Likelihood.

kinger101

Cobbler_tone said:

QrizB said:

Cobbler_tone said:

AlanP_2 said:

Tell that to the employees of Digital Equipment Company (DEC) back in the 90s. Second largest IT company in the world behind IBM with over 100k employees many of whom had significant holdings in DEC shares.
Worth peanuts when they went bust and added to the loss of income and the fact that those who had the most in company shares were typically the oldest and the ones who struggled to get new employment during a tech downturn and you had a perfect storm.

That's the exception rather than the norm. ... It is a low risk bet to make tens of thousands of pounds in most established companies after a few years service.

It's generally suggested here on the Pensions board that investing in single company shares rather than some sort of broad-based fund is a dangerous strategy, so I'd challenge your assertion that it's "low risk".

Choosing to make that sort of investment in the same company that employs you is just compounding the risk. All your eggs are in one basket.

If you're treating it as a "bet" rather than an investment, and only staking money that you're happy to kiss goodbye to, that's a different matter. But most of us wouldn't put tens of thousands on a horse in the 1430 at Kempton Park, and most of wouldn't choose to invest that much in a random SME that we just happened to be employed by.

Cobbler_tone said:

Our shares have grown 5%-10% every year for the past 30+

That period includes the dot-com bubble and the GFC. Whatever business you've been invested in, it's exceptional to have made positive returns throughout.

As a 40% tax payer, does the 'risk' lessen somewhat that I am buying £300 worth of shares every month for £90?
I'd certainly back my own company (one of the most successful in the world) than go and play the stock market with my £90.

I think the point is to acquire the shares at the discount and then sell as soon as whichever mechanism you are purchasing them by expires.

If anything, sell and repurchase inside a tax wrapper. Countless people at my last place held them outside ISA / SIPP and then moaned when they got a huge CGT bill when we were purchased by another company.

Cobbler_tone

I (and the company) contribute £2,500 a month (costing about £800 net) into a workplace pension and £300 a month (costing me £90) into a company share scheme. I’d prefer neither to ‘crash’ but one would make me more nervous than the other if it did. 
Highly unadvisable to hold them post employment (i.e. ‘the mechanism has expired’) unless you potentially want the tax man on your shoulder. To date my c£20k has netted over £100k. For that return I’m prepared to take the risk, along with just about every employee in my large company. You’ll always find a horror story, I’m sure the stock market is littered with them.

bolwin1

As has been previously mentioned, saving into accompany share scheme is almost always a good idea, providing you can afford it. Given the benefits, it's also fairly low risk. 

Keeping shares in the scheme after they have become tax free is high risk and (IMO) unnecessary. 

You should look at the scheme as 2 separate entities, pre & post 'maturation'. You need to ask yourself "If I had £20K to invest, would I spend it all on shares in the company I currently work for, given I no longer have any tax benefits associated with them". If the answer is no, sell them & put them in an ISA that matches your risk profile (or use the money to help build up your pension). 

kinger101

Cobbler_tone said:

I (and the company) contribute £2,500 a month (costing about £800 net) into a workplace pension and £300 a month (costing me £90) into a company share scheme. I’d prefer neither to ‘crash’ but one would make me more nervous than the other if it did. 
Highly unadvisable to hold them post employment (i.e. ‘the mechanism has expired’) unless you potentially want the tax man on your shoulder. To date my c£20k has netted over £100k. For that return I’m prepared to take the risk, along with just about every employee in my large company. You’ll always find a horror story, I’m sure the stock market is littered with them.

I gets RSU which are taxed via withholding taxes which is all squared up via PAYE.  I then put the taxed proceeds back into a SIPP so have effectively only been taxed 2p NI. I buy only index trackers.

Guessing you have something else, but Iyou are only deferring the taxman by not crystalizing the gain.  If you want to hold shares in your own company, a tax wrapper is sensible as it shields future gains.  And selling often avoid problems like having pension AA tapering.  If they grow outside a wrapper, the overall tax bill will be higher.

Another reason why company shares are not so good as they are not so liquid for employees.  Blackout periods for employees are typically most of the year.  So if things do start going south, you might have to wait a while before you can sell.

Nobody is saying don't take advantage of the scheme.  But as soon as you've got your match and you can trade, the advantage has been gained and you can move on.

Cobbler_tone

kinger101 said:

Cobbler_tone said:

I (and the company) contribute £2,500 a month (costing about £800 net) into a workplace pension and £300 a month (costing me £90) into a company share scheme. I’d prefer neither to ‘crash’ but one would make me more nervous than the other if it did. 
Highly unadvisable to hold them post employment (i.e. ‘the mechanism has expired’) unless you potentially want the tax man on your shoulder. To date my c£20k has netted over £100k. For that return I’m prepared to take the risk, along with just about every employee in my large company. You’ll always find a horror story, I’m sure the stock market is littered with them.

I gets RSU which are taxed via withholding taxes which is all squared up via PAYE.  I then put the taxed proceeds back into a SIPP so have effectively only been taxed 2p NI. I buy only index trackers.

Guessing you have something else, but Iyou are only deferring the taxman by not crystalizing the gain.  If you want to hold shares in your own company, a tax wrapper is sensible as it shields future gains.  And selling often avoid problems like having pension AA tapering.  If they grow outside a wrapper, the overall tax bill will be higher.

Another reason why company shares are not so good as they are not so liquid for employees.  Blackout periods for employees are typically most of the year.  So if things do start going south, you might have to wait a while before you can sell.

Nobody is saying don't take advantage of the scheme.  But as soon as you've got your match and you can trade, the advantage has been gained and you can move on.

Thanks Kinger.
We can trade any day of the week. Shares are purchased on pay day. All shares are released tax free if you retire or get made redundant. They release after 3/5 years. If you just leave, you forfeit 12 months of matching shares and get taxed on the past 3 years worth…I’m not leaving.

Some good discussions and good for thought on the thread. The bit missed by some is that I have been selling shares throughout my career for various purposes.